In a recent announcement from Intel – the world’s leading technology company – a major investment of RM30 billion (S$9.7 billion) was made for the construction of a new chip-testing and packaging factory in Malaysia.
The investment allowed for the expansion of chip production in the Southeast Asian nation following a worldwide shortage of semiconductors partly caused by the COVID-19 pandemic. This led to an unprecedented demand for electronics and disruptions in supply chains which saw car makers cut production and delays in smartphone deliveries at companies including Apple. In Malaysia alone, the chip assembly industry accounted for more than a tenth of global trade worth over US$20 billion (S$27.3 billion).
According to Intel Chief Executive Pat Gelsinger, chip demand climbed 20% during the pandemic overall. He expects the crunch to last till 2023. Overall the semiconductor industry this year will grow more than it has in the last two to three decades. But still the gaps are large … and I predict that the limitations of the shortages will persist into 2023.”
Gelsinger was in Taiwan and Malaysia this week for talks that underscore how Asian manufacturing will be crucial to Intel’s turnaround efforts.
His trip included plans for a meeting with leaders of TSMC, according to people familiar with his schedule. Intel both needs TSMC’s advanced manufacturing services and plans to compete with the Taiwanese company in the so-called foundry business, a tricky balancing act for Intel’s Chief Executive.
Apart from Malaysia, Intel also operates a plant in Dalian, China. This is Gelsinger’s first trip to Asia since taking the top job at Intel and comes as he lobbies the US government to allocate money for the country’s chip industry to domestic chipmakers only.
He argued that overseas manufacturers – such as TSMC and Samsung Electronics, which both have plans to build plants in the US – shouldn’t get money through the Chips Act, which is going through political approvals in Washington. As part of those efforts, he further argued the concentration of advanced manufacturing in Asia and Taiwan is a strategic risk.
The chip giant opened its first production facility outside the US at a 5-acre assembly site in the Malaysian state of Penang in 1972. By 1975, it employed about 1,000 people and had become a crucial part of the company’s manufacturing chain, the Intel website revealed.
The Malaysian government said in a statement that this investment in a new chip plant will create over 4,000 jobs at Intel and more than 5,000 construction jobs in the country.
According to Malaysian Minister of International Trade and Industry Mohamed Azmin Ali, “This undertaking is indeed timely given the bullish global demand driven by the chip shortages and the potential challenges arising from the recovery of the pandemic globally.”
In addition, there are plans for the US and Malaysia to sign an agreement by early next year towards improving transparency, resilience, and security in the semiconductor and manufacturing sector supply chains.
As in other manufacturing hubs across the world, the pandemic has upended supply and production chains and depressed fundamental demand. Malaysia is now keen to continue attracting the big-name investment and jobs it needs to climb the tech ladder and keep the local economy humming.
More than half a million people were employed in Malaysia’s electrical and electronics (E&E) industry in 2020, working with global chipmakers from STMicroelectronics and Infineon Technologies to Intel and Renesas Electronics.
Minister Azmin further added that the nation approved RM47 billion of investment – mostly foreign – in the E&E sector in the first half of the year versus RM5 billion in the year-ago period.
